Payroll data a great surprise, do we really need more QE?

The US economy added a net 243k jobs in Jan, 257k of which was in the private sector and both are well above expectations of 140k and 160k respectively. Revisions to the two prior months were up by 60k and the unemployment rate fell to 8.3% from 8.5% as while 508k people joined the labor force, a whopping 847k jobs were added in the household employment survey. The U6 unemployment rate fell to 15.1% from 15.2%. Manufacturing added 50k jobs, 38k more than expected and construction saw gains of 21k. Job gains were also seen in retail, business services, education/health, and leisure/hospitality. Total government employment fell by a net 14k. The avg workweek was 34.5 vs est of 34.4 and the avg duration of unemployment did tick down to 40.1 from 40.8. Remaining a negative, the participation rate fell to a new low of 63.7% from 64.0% and avg hourly earnings rose just 1.9% vs CPI at 3.0% and the PCE at 2.4%. Bottom line, this is the best payroll gain since May ’10 with an amazing gain in the household survey and the internals of the report also look mostly positive. If only Bernanke gave his testimony after today’s report, we’d see whether he would have stuck to the 2014 time frame for zero rates and the possibility of more QE. In terms of market reaction, while today is just one number subject to multiple revisions, we’ll see whether the initial enthusiasm will last if there is less of a possibility of more QE, arguably the main factor keeping this market so levitated over the past few months.

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